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Buy The D*mn Latte
Good morning, beautiful people! Today, we're dishing tips to fuel your journey toward financial stability and up your credit card game. Remember the golden rule: Spend less than you make, and invest the rest. It's simple but requires a plan, discipline, and habit reshaping.
You're in complete control of your financial destiny. Let us repeat it, you're in complete control of your financial destiny! Stay informed, make choices on where you spend your hard-earned money, and execute letting your dollars work for you. Soon, you'll be on your way to financial security.
Enjoying our newsletter? Share it with friends and join us in our dream of creating 10,000 millionaires! Stay financially savvy, and catch you on the flip side!
Today we are bringing you:
Buy the d*mn latte: How to create a spending plan that doesn't cut out things you love
Are airline cards worth it: Should you get an airline card, answer might surprise you
Today's edition is brought to you by Refside. Fun referee apparel for refs by refs.
When the word budget is mentioned
Let's talk about the B word!
Hold on, don't delete this email just yet! Trust us, it'll be worth your time. We know that budgeting or the mention of the word can be a tad overwhelming along with eye rolls and changing of topics, but we're here to show you that it doesn't have to be that bad. And with a few hours of your time, you will be leaps ahead of others and well on your way to financial security. So, let's jump right in!
Picture This: Imagine you've finally got that perfect piece of land and you're ready to build your dream home. But, instead of drawing up blueprints, you dive straight into laying the foundation. Sounds absurd, right? Just like building a home, managing your finances requires a solid plan - a spending plan. It's the foundation of your financial journey, and without it, you're in for a rough ride.
Ever wonder why an astounding 78% of professional athletes make millions, but end up broke 3 years after retirement? It's often because they spent every dollar they made without a plan and didn't take a small portion to invest in their future. One of our favorite reminders that EVERYONE needs a spending plan is Mike Tyson. Mike Tyson, ruled the world with his incredible boxing skills, antics, and fortune. Yet, his reckless spending led to a bankruptcy after he accumulated a massive fortune of 400 million. But imagine this: if Mike had saved a mere 10% of his $400 million fortune, investing $40 million in a diverse portfolio, he would have been laughing all the way to the bank. With a 10% annual return, his wealth would have compounded to a staggering $300 million over 20 years. Mike's tale is a captivating reminder of the power of saving and investing for a bulletproof financial future.
In short, we DON'T want you to be like Mike, and since you are spending time with us this morning we bet you DON'T want to be like Mike either.
Now, you might think budgeting means cutting out all the fun stuff, like brunches, lattes, or the latest sneakers. Wrong! We've got your back with a simple and engaging approach to building your budget that still allows for some fun.
Introducing the 50/30/20 plan: a straightforward way to allocate where your hard-earned money goes. Here's how it works:
Needs (50%): Allocate 50% of your after-tax income for essential expenses like housing, utilities, food, transportation, and minimum debt payments.
Wants (30%): Set aside 30% for non-essential expenses that make life more enjoyable, like dining out, subscriptions, vacations, gym memberships, or clothes.
Savings/Investments (20%): The remaining 20% goes toward saving, investing, or extra debt repayment.
For those with irregular income, calculate your average monthly income by dividing your total net income (after taxes and expenses) from the past 12 months and dividing that by 12.
Getting Started: If you're unsure how to begin, don't worry! Start by writing everything down on paper, using a spreadsheet (here's one we made for you, you're welcome), or an app like Rocket Money, Mint, or Empower. The key is understanding(and writing down) where you're spending your money, not where you think or hope you are spending your money.
Finding Balance: If your percentages are off, don't panic! This exercise helps you see where you are today and what you need to do to reach your goals. Identify expenses you can cut, or if necessary, focus on increasing your income through side hustles, negotiating a raise, renting out a room in your home, or selling unneeded items.
Expense category confusion: There's often a blurry line between needs and wants, with some expenses seeming to straddle both categories. A helpful tip to distinguish between the two is to ask yourself, "Can I truly survive without this?" If the honest answer is yes (and trust us, you can survive without those new Nike shoes), then shift that expense into the wants category.
Quick Summary Of How To Get This Setup:
Determine after-tax income: Calculate your monthly income after taxes. For variable incomes, divide your total after-tax income from the past 12 months by 12.
Break down expenses: List your expenses, such as rent, utilities, groceries, and transportation using our custom spreadsheet.
Categorize expenses: Divide your expenses into needs, wants, and savings/investments according to the 50/30/20 rule.
Adjust spending: Rebalance your spending to fit the 50/30/20 rule if/when needed.
Track progress: Keep an eye on your spending and progress over time to ensure you're sticking to your budget and achieving your financial goals.
Make adjustments: Be flexible and open to making changes to your budget as your circumstances evolve.
Use budgeting tools: Consider apps like Rocket Money, Empower, or Mint for ongoing budget management. If you prefer the old fashion way, here is our spreadsheet we created, or you can use ole fashion pen and paper.
Where do you invest: Don't know where to put that 20%, keep reading every week and we will guide you on what to do with that money so it is simple to manage and automatic.
Remember that achieving financial security is a marathon, not a sprint. It's alright if your current investment rate is nowhere near 20% or even 0%. Instead, focus on incrementally increasing it by 1% and then steadily work towards raising that percentage monthly or yearly until you reach the 20% mark. Remember, the secret to financial stability and growth lies in spending less than you earn and investing the difference. With persistence and dedication, you'll be well on your way to a secure financial future. And for our peeps exceeding 20%, we tip our hat to you!! You will achieve financial security much much faster than everyone else. Happy budgeting!
So you're wondering if airline credit cards are worth it, right? The short answer is yes, they can be worth it, but only in specific situations. So let's chat about the pros and cons of airline credit cards and how they might fit into your lifestyle.
First, let's discuss some downsides of airline credit cards:
Earning travel rewards on everyday spending: Although airline credit cards can offer bonus miles on some everyday purchases, the earning rates may not be as impressive as you'd hope. On the other hand, flexible rewards-earning(non-airline) cards can skyrocket your rewards, with some racking up a whopping 10x earnings in select categories. For example, let's compare two cards: the American Express Gold and the popular Delta Amex Gold. When we look at the food earning category, the Delta Amex Gold offers 2x points, while the Amex Gold card provides 4x points. In this case, you'd be earning double the points for food purchases with the American Express Gold compared to the Delta Amex Gold.
Earning miles on your preferred airline: You might think that using an airline card would earn you the most points on that airline, but that's not always the case. For example, the Delta Amex Gold card earns 2x points for all Delta purchases. In contrast, the American Express Platinum card earns 5x points for all airline purchases. So, most of the time, a non-airline card gets you more points.
Flexibility: Airline card points can only be used with that specific airline, which can be limiting if you want to travel somewhere your airline doesn't go. Non-airline cards usually allow you to transfer your points to various airlines, hotels, and cruise options.
Now, let's talk about the reasons why an airline credit card might be worth it:
Welcome bonus: You can earn a significant welcome bonus with an airline credit card, which can help you secure flights for an upcoming trip. Just be sure to check the spending requirements to earn that bonus.
Flight benefits: Airline-branded cards often offer perks like free checked bags, priority boarding, and inflight purchase discounts. Helpful when you are working on gaining status with that airline.
Companion certificates: Some airline credit cards offer an annual companion certificate, which can save you money on travel.
Lounge access: Some cards offer complimentary or discounted lounge access, saving you hundreds of dollars each year.
Faster path to elite status: Airline-branded cards can help you reach frequent flyer elite status faster by spending on the card.
Now let's look at reasons you should avoid an airline credit card:
Multiple airlines: If you're not loyal to a specific airline, a flexible(non-airline) rewards card can help you find the best deals across different carriers.
Higher earnings on flights: Flexible rewards cards can earn up to 10x points per dollar spent, compared to 2-3 miles with airline cards.
General travel expenses: Flexible rewards cards can offer better earnings on experiences like boat excursions, city tours, or museum passes.
Everyday purchases: Flexible rewards cards can offer up to 10x earnings in certain categories, making them a better choice for everyday spending.
Redemption flexibility: Cards like Membership Rewards, Ultimate Rewards, or Capital One miles let you find the best deals across participating airlines and transfer points for award flights.
Mile devaluation concerns: Travel rewards cards can help you earn rewards faster, reducing the risk of devaluation over time.
Limited award availability: Flexible rewards points come with no blackout periods and more airline options during peak travel times.
Trip insurance benefits: Premium cards like Amex Platinum, Capital One Venture X, or Chase Sapphire Reserve offer trip insurance benefits not typically found on airline credit cards.
Existing elite status: If you already have elite status with a frequent flyer program, an airline-branded card might not add much value for you.
In summary, whether or not an airline credit card is worth it really depends on your personal lifestyle and travel habits. If you're loyal to a specific airline, need help getting to elite status, and can take advantage of the perks offered, an airline credit card could be a great choice. If not, you might want to consider a more flexible rewards-earning card. Happy travels!
Read. 5 things to avoid to live a long life according to a man who is 100.
Read. Have you ever thought about setting up the younger members of your family for a prosperous future? Well, we haven't even scratched the surface yet, but let's get those mental gears turning on how you can pave the way to create generational wealth.
Read. 70% of us are stressed the hell out over money, keep reading weekly and you won't be part of the masses.
Watch. Craving a quick and engaging rundown? Check out this video on the fantastic 50/30/20 budgeting plan, making budgeting a breeze!
Listen. Dive into a playful exploration of credit card points: Is brand loyalty truly rewarding, or should you mix it up?
Watch. Quick video explaining an index fund like FXIAX.
Read. Strike a cash back guarantee from Google Flights when you find a cheaper option, who doesn't love free money!
We love hearing from our subscribers and we want to get you involved in the conversation! So, every week, we'll be bringing you a question from one of our awesome subscribers (just like you!). Here's how you can get in on the action: simply reply to any of our emails with your question, and we'll do our best to respond to you personally. And who knows? Your question might even make an appearance in our newsletter for all to see! We can't wait to hear from you and keep the conversation going.
Hey Budgeteer -
I want to invest in FXIAX, but I want to be clear is that the same thing as my IRA that I invest in every month?
Thanks,
Sally T
Great question Sally!
An IRA, or Individual Retirement Account, is an account designed for retirement. It allows you to invest in various assets, such as stocks, bonds, ETFs (exchange-traded funds), or index funds. These investments help your money grow over time.
Two Types IRAs: Traditional IRA and Roth IRA. With a Traditional IRA, you can typically deduct your contributions from your taxable income, which lowers your tax bill today. However, you will pay taxes on the withdrawals during retirement. With a Roth IRA, you pay taxes on your contributions now, but earnings grow tax-free, and your withdrawals will be tax-free.
An index fund is an investment you can buy that is like holding a basket of stocks or bonds. It allows you to invest in a diversified portfolio of stocks or bonds without choosing individual securities. For example, the FXIAX fund is designed to mirror the S&P 500, which includes the top 500 U.S. companies, like Microsoft, Apple, and Amazon. Many index funds are available, but since we love the simple path to wealth, we will only cover a handful.
An IRA and an index fund serve two different purposes. An IRA is an account that offers tax advantages for retirement savings, while an index fund is an investment product that aims to replicate the performance of a particular market index. To invest in an IRA, you will need to open an account with a brokerage firm, such as Fidelity, Schwab, or Vanguard. Once you have set up an IRA, you can THEN you can purchase index funds, ETFs, stocks, or bonds within the account.
Nothing in this email is intended to serve as financial advice. Do your own research. Thanks for reading, if you have any questions, comments, suggestions, etc. about the email don’t hesitate to send us a reply.